Attorney Review: The Beginning
On either side, you quickly learn that the New Jersey Real Estate Contract that your recently signed does not legally bind the parties to the Contract. Why not you may ask. Well New Jersey has a mandatory provision in your Contract call the attorney review clause. The attorney review clause provides both Buyer and Seller a three-day attorney review window from the date both parties received the fully executed contract. During such time, the parties have the opportunity to review the Contract within the three-day attorney review window and disapprove of the Contract. If the disapproval is not transmitted to the other party and the period expires, the parties will be legally bound by the terms of the Contract.
So where did it all start. A lawsuit by the New Jersey State Bar Association, hereinafter NJSBA, followed the ruling under State v. Bander. In Bander, a licensed real estate broker used a blank template to prepare a Contract adding provisions to the Contract he created himself. This was presented to the parties who then signed. The broker was charged with the unauthorized practice of law. During this time, legislation provided an exemption for licensed broker preparing real estate contract from criminal charges. The trial court found the exemption unconstitutional as a legislative attempt to allow the unauthorized practice of law under certain circumstances. The Supreme Court of New Jersey reversed the ruling of the trial court stating that the intent of the legislation was not circumvent the regulation of unauthorized practice of law but to shield from criminal charges. However, the Court did not make a determination as to whether the licensed broker actions constituted an unauthorized practice of law. This left uncertainty as to whether certain actions by the real estate broker constitute an unauthorized practice of law. Backed by the trial testimony and evidence in the foregone case, public hearings were held providing the support for the Court innate ability to discharge its responsibility and duty under the Constitution to regulate the practice of law and rule-making authority in proceeding matters.
In the early 80’s, the NJSBA filed a complaint against the New Jersey Association of Realtor Boards, NJARB. The NJSBA sought a ruling that licensed real estate brokers or salespersons engage in the unauthorized practice of law when they prepare contracts for the sale or lease of property. The purpose of the lawsuit was to protect the consumer. Allowing the layperson not to be bound by the terms of a real estate Contract prepared by a realtor without have the opportunity to review and disapprove of same by seeking the advice of counsel. The parties reached an agreement and submitted a joint application for a consent judgment for review by The Supreme Court of New Jersey. In 1983, the Court modified and approved the consent judgment. The joint application stated that licensed real estate brokers and salespersons shall be permitted to prepare certain types of residential sales and lease agreements if these agreements contain specified provisions. That in order to protect the consumer, it is mandated that an attorney review provision be transcribed in real estate contract and leases wherein such provision could not be waived or removed by either party. The Court modified the consent judgment stating that licensed real estate brokers and agents are permitted to prepare contract of sale for one to four family homes and vacant one family lots provided that the Contract must contain clear and unambiguous language that the Contract becomes legal binding within three business days during which the parties may choose to review with their respective counsel and cancel the contract. It is also mandated that the Contract include a three party attorney review clause broken down into study by an attorney (parties may choose counsel to review the contract within the attorney review period that if not disapproved of during the three day attorney review period will be legally binding on both parties), counting of time (three-day review window begins from the date both parties received the signed Contract, excluding weekends and holidays), and notice of disapproval (if the contract is disapproved, attorney must notify the other party and the broker by way of certified mail, by telegram, or by delivering it personally, or otherwise the Contract will be legally binding upon expiration of the three-day period). The Court affirmed the modified consent judgment leaving the door open to further review and modification.
Over the next 30 plus years, modifications have been made to the rules. More recently, the Court in Conley v. Guerrero modified the transmittal language for disapproval of the Contract to state that the notice of disapproval of a real estate contract may be transmitted by fax, e-mail, personal delivery, or overnight mail with proof of delivery. Once again, the Court recognized that such language may need further modification in the future.